May 6 (Bloomberg) -- Russia called on Ukraine to postpone a
May 25 presidential election and draft a new constitution first,
as the government in Kiev continued a military offensive against
separatists in the country’s east and south.

It would be “more logical and fair” to complete the
constitution in the fall and then hold elections by year-end, as
foreseen in a February accord, Russian Foreign Minister Sergei
Lavrov told reporters in Vienna, where he met his German
counterpart. “Holding an election when the army is being used
against part of the population is quite illogical.”

Ukraine’s government and its U.S. and European allies
accuse Russia of fomenting unrest in eastern Ukraine. They have
imposed sanctions on people and companies close to President
Vladimir Putin, and threatened to tighten them if Russia doesn’t
stop supporting the separatists before the presidential vote.

Lavrov’s U.S. counterpart, Secretary of State John Kerry,
dismissed as “bogus” and “contrived” plans by pro-Russian
forces in the Donetsk region to hold a referendum on secession.

“We flatly reject this illegal effort to further divide
Ukraine,” Kerry said today at a news conference in Washington
with European Union foreign affairs chief Catherine Ashton.
“Its pursuit will create even more problems in the effort to
try to de-escalate the situation.”

Kerry urged Ukraine to proceed with the May 25 vote and
reiterated that the U.S. is ready to impose sanctions aimed at
sectors of Russia’s economy.

Biggest Gain

Russia’s Micex Index of stocks rose 1.6 percent at the
close in Moscow, the biggest gain in more than two weeks. The
ruble gained 0.7 percent against the central bank’s euro-dollar
basket. It has lost about 7 percent this year against the
dollar, the third-biggest drop among 24 emerging market
currencies tracked by Bloomberg.

The Ukraine Equities Index rose 1.4 percent, its first gain
since April 23, while the hryvnia fell 1.4 percent against the
dollar.

Ukraine’s government began its assault against rebels in
the Donetsk region on April 13, after gunmen seized buildings
and took several dozen captives.

The Ukrainian troops fighting the separatists are
encountering many activists from Crimea, which Russia annexed in
March, as well as Russians and Chechens, Interior Minister Arsen
Avakov said on Facebook. Avakov said four soldiers and about 30
rebels were killed in the latest clashes yesterday.

NATO Steps

The pilots of a Ukrainian military helicopter survived
after their aircraft was hit with machine-gun fire and crashed
into a river in the Donetsk region, the Defense Ministry said on
its website. Insurgents have downed three choppers and damaged
another since May 2.

Acting President Oleksandr Turchynov today named Lieutenant
General Anatoliy Pushnyakov as the new head of the country’s
ground forces.

Russia is pushing for Ukraine to change its constitution to
devolve more power to its regions and give official status to
the Russian language. About 17 percent of Ukraine’s 45 million
people identified themselves as Russian in a 2001 census.

French President Francois Hollande warned today that
Russian efforts to block the Ukrainian election risked sparking
a civil war. He said EU leaders will keep pressing Putin to
allow the vote to be held.

Russian Troops

Russia has about 40,000 troops along the Ukrainian border,
according to the North Atlantic Treaty Organization. NATO won’t
hesitate to take further steps to defend member states if Russia
continues to destabilize the region, Secretary General Anders
Fogh Rasmussen said today in Brussels. He cited steps already
taken, including expanded air policing in the Baltic region and
a bigger naval presence in the Black Sea.

In Vienna, Lavrov and EU officials discussed ways to revive
Ukraine diplomacy after the unraveling of a series of deals.
Lavrov said a new round of talks won’t work if they repeat the
format of last month’s Geneva meeting “where the opposition to
the current regime in Ukraine is absent from the negotiating
table.”